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Fiscal apocalypse now
J Bradford DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US Treasury Secretary. Previous Webdiary articles include Semi-rational exuberance, Eyes wide shut on global warming, and Europe's free riders.
by J Bradford DeLong
As support for President George W Bush in the United States has crumbled over the past year, perhaps the most surprising element is the revolt of economists and observers of economic policy. Last week, Peggy Noonan, a speechwriter for both President Reagan and the first President Bush declared in the Wall Street Journal that had she known what George W Bush’s fiscal policy would be, she would have voted for Al Gore in the 2000 presidential election.
“If I’d thought [that George W Bush] was a big-spending Rockefeller Republican... I wouldn’t have voted for him...,” Noonan wrote. Bush “did present himself as a conservative... [and] conservatism is hostile, for reasons ranging from the abstract and philosophical to the concrete and practical, to high spending and high taxing...” And then she falls into near-complete despair: “Mr. Bush will never have to run again, and he is in a position to come forward and make the case, even if only rhetorically, to slow and cut spending. He has not. And there’s no sign he will...”
Noonan is not quite correct. George W Bush presented himself not as a normal conservative, but as something he called a “compassionate conservative,” thus preserving a certain amount of ambiguity. Some focused on the “conservative”: they expected the Bush administration’s fiscal policy to keep a tight rein on spending and to eliminate many programs in order to finance significant tax cuts.
Others focused on the “compassionate”: they expected Bush’s fiscal policy largely to eschew tax cuts and to adopt largely Democratic spending priorities, including expanded federal aid to education and a prescription drug benefit, thereby showing that Republicans could run a more cost-effective version of the social-welfare state. Still others interpreted “compassionate conservatism,” as the commentator Andrew Sullivan put it, as a “smokescreen... necessary for any vaguely successful retrenchment of government power in an insatiable entitlement state.” They expected tax cuts to be followed by a fangs-bared attack on social-welfare spending once deficits reemerged.
As a result, in 2000 and 2001 nobody was really sure of the Bush administration’s policy direction. Was it traditional fiscal conservativism? Was it to do what Democrats do, but do it better? Was it to “starve the beast” by pumping up government debt to the point that social programs would have to be cut?
The first two priorities, if well designed and well implemented, are certainly honorable goals for a government to pursue. The third is less honorable, and likely to fail: it relies on the dangerously weak premise that the party in power’s political adversaries will be more public-spirited and less ruthless when they return to government.
Of course, conservatives and Republicans could hope that their own favorite policy priorities would emerge as the administration’s preferred strategy. Or they could be content with whichever of the three strategies that they expected to see, agreeing that, in any case, fiscal policy was always going to be much better than it would have been under Democratic rule.
But then a strange thing happened: the Bush administration did not order any of the three options that were thought to be on the menu. It chose something different entirely: big tax cuts, yes, but tax cuts that were badly designed from a genuine supply-side perspective aimed at boosting growth, as well as Democratic domestic spending priorities, but very badly implemented. Moreover, the Bush administration combined its policies with an extraordinary reluctance to veto anything coming out of Congress, and, after the year or two that it took for this to become obvious, an inability to restrain Congress at all.
What emerged was neither traditional fiscal conservatism nor Democratic policies without Democrats nor starve-the–beast populism, but something that has no name. An exchange between two characters in a scene from the movie “Apocalypse Now” captures an anti-ethic that characterizes the Bush administration’s policies as well:
Willard: “They told me that you had gone totally insane, and that your methods were unsound.”
Kurtz: “Are my methods unsound?”
Willard: “I don’t see any method at all, sir.”
It is not that Republicans and conservatives think that the Bush administration has adopted the wrong method, but that they don’t see any method at all that has driven them into their (late) fiscal-policy revolt. And that is why so many of them now wish that they had had a different candidate to vote for back in 2000.
Copyright: Project Syndicate, 2006.
www.project-syndicate.org
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Bring on the Fiscal apocalypse
What ever happened to the “Peace Dividend?”
The Bulletin of Atomic Scientist here reports that:
“Fifteen years after the end of the Cold War, the United States continues to spend billions of dollars annually to maintain and upgrade its nuclear forces. It is deploying a larger and more accurate preemptive nuclear strike capability in the Asia-Pacific region, and shifting its doctrine toward targeting U.S. strategic nuclear forces against "weapons of mass destruction" complexes and command centres.
As of January 2006, the U.S. stockpile contains almost 10,000 nuclear warheads. This includes 5,735 active or operational warheads: 5,235 strategic and 500 nonstrategic warheads. Approximately 4,225 additional warheads are held in the reserve or inactive stockpiles, some of which will be dismantled. Under plans announced by the Energy Department in June 2004 (and possibly revised in spring 2005), some 4,365 warheads are scheduled to be retired for dismantlement by 2012 (see Nuclear Notebook, September/October 2004). This would leave approximately 5,945 warheads in the operational and reserve stockpiles in 2012, including the 1,700-2,200 "operationally deployed" strategic warheads specified in the 2002 Moscow Treaty or Strategic Offensive Reductions Treaty.”
We should be worried about this Arsenal under control of a religious fanatic, “A man who has one on one conversation with his God.” Maybe we should wish a Fiscal apocalypse it would be better than the apocalypse the US seems to dream of.
Bookmarks
And just why don't Americans have Webdiary in their list of "favorites" or "bookmarks"? Our marketing drive must be failing. Time to get in there. The mid-terms are almost here, and they need all the wisdom we can offer.
Do I need special permission to use President Buffoon in public? George the Smaller is great, but PB is really catchy.
America
Michael de Angelos, regarding Bush's election you say: "Why didn't anyone listen to us?"
I venture to suggest two answers. (1) Americans in general believe they know more about US politics than do Australians, surely a not unnatural belief, and (2) if "us" means you and likeminded contributors to Webdiary, why the bloody hell should you think that Americans have Webdiary in their list of "favorites" or "bookmarks"?
OK, I know that your question was only rhetorical but get over the superiority complex.
Michael was right nevertheless
Before Howard destroyed the free speech forum of the Canberra Times' Have Your Say, many contributors worried that a re-election of the multi-failed George W Bush would be a disaster for the entire world. And it has been proven so. We, knowing that Howard was always only a "nose" behind his mentor and protector, were validly concerned how his election and Howard's would adversely affect our already debt-ridden false economy. In fact I wrote on the 15 Septem ber 2004 (please bear with me).
"Diversions for a false economy?
There is no doubt that the Howard Government is the most extreme right wing conservative group in Australia's history. As such, the "big end of town" makes obscene and usually undeserved profits while the middle and lower classes slip more and more in debt. As a young married sailor with three children in the 50's, I well remember the Menzies' era. It is not a plesant memory. History repeats with a totally insecure "copy cat" in John Howard. However, he has neither the charisma nor the stature of the old arch-Monarchist but, nevertheless follows his policy of selling assets which inevitably result in "minimum services with maximum cost"! A fair price, a fair wage, a fair family life? In fact the word "fair" was apparently absent from Menzies' otherwise large vocabulary. In that at least, Howard is identical. Menzies was thought of as the "benevolent dictator". Only the noun applies to Howard. People should consider their burgeoning debts; loss of insecure jobs; reduced income for more effort, and the possibility of losing their mortgaged homes. They will realise that Howard's false economy is feeding the credits of the unaccountable foreign businesses by increasing the debits of "the mob", then they will indeed need a "safety net" for everything. Remember that the beneficiaries of Howard's reversal of the industrial revolution in 1850, is NOT for the people who elected him. So, IF you are thinking of voting Liberal - Carpe Diem before it is too late." End of Quote.
I told you so
Why didn't anyone listen to us?. We all saw what a disaster George Bush would be. The Republicans were so hooked on the idea of winning, they will see the country destroyed before they give up power or rid themselves of the Bush clique.
And Now For The Cigar
When Bill Clinton took his first tilt at the presidency, he had a lot of small-state populist experience which he shrewdly parlayed into an engaging dialog with Mr and Mrs America. Gregarious and super-intelligent, he bushwacked (pardon the pun) George Snr.
Hated from the outset for beating the Republicans at the game they regarded as their own (twice, of course), he had to undergo a frenzied, bitter and a just-this-side-of-treasonous attack from the mad-dog operatives currently supporting their President Buffoon.
Just how dangerous and totally whacko (except in their ability to plunder the public purse) the likes of Rove, Cheney, Rumsfeld, Perle, Wolfowitz et al are, is growing in the consciousness of the US public with each passing day. Bush the Smaller will bow out of politics as perhaps the most disliked, if not the most despised, President of all-time, the failure he was destined to be.
It is said that greatness is sometimes thrust upon the most reticent of leaders. That assumes that the light is on and somebody is home.
Hitting Nails on their Heads
A neat summing-up by Mr DeLong... and, note please Bush-boosters, not one that can be construed as partisan. It will be interesting to see if any of that ilk respond to this, as it doesn't give them any leeway for the usual reflexive dismissals...
Sadly, though, we pay more attention to the hired hacks on such issues, than we do economic fundamentals. Not so on Wall St, by the way, which is why John Kerry - admittedly a lousy candidate - had almost as much money in his war chest as George come last election... which meant that, once you subtracted the huge amount George gathered from his buddies in the War and Oil sectors, Kerry actually won the rest of the business and finance vote - opposing a standing Republican president, what's more. However, as we might expect, the loyalist hacks have been slow to abandon ship - after all, it's where their bread is buttered - but are now beginning to do so in droves, as the lame duck can no longer promise them much of a future.
And, on a comparative note, I wonder when our resident Howard-lovers will bother to read some of the work on housing bubbles in The Economist... and, finally start blaming Howard for deliberately fostering the most dangerously inflated housing markets in the entire world - by a VERY substantial margin. Whilst not perhaps as reckless an act as Bush's, it's important to remember that the US economy is much, much larger and more robust than ours... and, so our follies are likely to be proportionally more damaging in their eventual impact. Something to think about?
All the best.